Since the RBA left the cash rate steady, several lenders, including most of the major banks have trimmed up to 40 basis points off certain fixed rate products, says leading mortgage broker Loan Market.
Loanmarket Sunshine Coast Mortgage Broker Dominic Polifrone said the latest shift in fixed interest rates indicated lenders were all anticipating further rate cuts this year and gives many home owners and home buyers elevated consideration for locking in their interest rates.
“We haven’t seen fixed rates this low in several years and the spread between them and variable remains in the unique position where variable are nearly a full per cent higher,” Mr Polifrone said.
Mr Polifrone said that although the RBA cash rate is at 3 per cent, the chances of it falling more than a full percentage point in the year next were slim, considering the RBA’s conservative response to the soft areas of the economy over the past year.
“For those looking at fixed rates right now, there’s an opportunity to hedge your bets and lock in an interest rate that could be lower than variable rates over the term of the loan,” he said.
“Fixed rate products are currently priced at a level that variable rates may not reach for several months; even with the help of RBA rate cuts. It’s been highlighted over the past few weeks that the cost of funds for lenders are easing, but whether or not they significantly trim variable rates remains to be seen.”
Mr Polifrone said all borrowers had varying considerations and that one’s personal circumstances, aversion for risk and financial goals were the key fundamental to bear in mind when looking at fixed interest rates.
“Fixed rate borrowers should have the mindset to accept that variable rates could fall to a place lower than their fixed rates.”
Mr Polifrone said that borrowers, who wanted the security of knowing their interest rate and mortgage repayments payments we’re locked in, would be suited towards fixing right now.
“For young families buying a home, it could help knowing your repayments are set at a level you can budget around or property investors who want to lock in their repayments at a lower level while rental yields remain high,” he said.